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Microsoft declares war on 'sophisticated' click-fraud scheme

Legal offensive on click laundering

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Microsoft has mounted a legal offensive against scams targeting its pay-per-click advertising services, filing two lawsuits that take aim at what it says is a sophisticated new form of the crime.

In two complaints filed this week, Microsoft accused web publishers of engaging in a practice it calls "click laundering," It involves traditional forms of click fraud, in which automated scripts or hired individuals generate large numbers of clicks on website ads. But in a twist, the technique conceals the scheme by forcing the clicks to take place on parked domains and then altering referrers to give the appearance the clicks happened on the publishers' website.

The lawsuits were filed against science news and shopping site RedOrbit.com and more than a dozen unknown "John Does." Many of them are accused of falsely crediting ads to HelloMetro.com, although the network of online city guides isn't named as a defendant.

"By fraudulently generating a high volume of invalid clicks and by channeling them into Microsoft's ad network, the defendants sought to illegally profit at the expense of advertisers," one of the complaints alleges. "Microsoft expended substantial money and resources to investigate and remedy the effects of the defendants' conduct, refunding advertisers for all invalid clicks generated on RedOrbit's website during the time period at issue."

The lawsuits are the latest to take aim at click fraud, which usually is carried out by millions of malware-infected computers that are programmed to click on selected ads. The fraud can be perpetrated at the direction of web publishers who stand to profit each time an ad on one of their sites is viewed. Unscrupulous business operators have also been known to carry out click fraud to drive up competitors' advertising costs.

About 17 percent of ad clicks were fraudulent in the first quarter of this year, according to Click Forensics, which collects data about the practice. That's up from about 14 percent in the same three quarters of 2009.

According to Microsoft, RedOrbit reported about 75 clicks per day on adCenter ads in late 2008. But as a result of the scheme, the number of clicked ads skyrocketed to more than 10,000 per day in January and February of 2009, the complaint alleged.

Had the click-laundering scheme gone undetected, it could have defrauded advertisers of hundreds of thousands of dollars, Microsoft said in a press release. ®